Suppose the Expected Return for the Market Portfolio and Risk-Free

question 13

Multiple Choice

Suppose the expected return for the market portfolio and risk-free rate are 13% and 3% respectively. Stocks A, B, and C have Treynor measures of 0.24, 0.16, and 0.11, respectively. Based on this information an investor should

• A) buy stocks A, B and C.
• B) buy stocks A and B and sell stock C.
• C) buy stock A and sell stocks B and C.
• D) sell stocks A, B and C.
• E) hold stocks A, B and C.

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Definitions:

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response on its own.

Conditioned Response

A learned response to a previously neutral stimulus that has been repeatedly presented along with an unconditioned stimulus.

Unconditioned Stimulus

A stimulus that automatically triggers a response without any need for prior learning.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, eventually triggers a conditioned response.